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Bull of the Day: Pool Corp (POOL)

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Pool Corporation (POOL - Free Report) was a COVID pandemic winner as everyone had staycations but that momentum is extending into the reopen as well. This Zacks Rank #1 (Strong Buy) is expected to grow revenue another 21% in 2021.

POOLCORP is the world’s largest wholesale distributor of swimming pool and related backyard products. It operates approximately 400 sales centers in North America, Europe and Australia from which it distributes more than 200,000 national brand and private label products to roughly 120,000 wholesale customers.

It operates in 4 segments including Pool Maintenance, Pool Construction and Renovation, Irrigation and Landscape, and Outdoor Living, which includes lighting, grills, outdoor kitchen components.

Raises the Dividend By 38%

On May 4, POOLCORP announced that it was raising its dividend by a whopping 38% to $0.80 per share from $0.58.

The dividend was yielding 0.6% before the announcement.

It also added to its existing share buyback program with an additional $450 million.

The current program had $107.4 million remaining so there is now $557.4 million available in the program.

Huge Earnings Beat in Record First Quarter

On Apr 22, Pool reported its first quarter 2021 results and blew by the Zacks Consensus by $1.22, or 101.7%.

Earnings were $2.42 versus the Zacks Consensus of just $1.20.

It was a record first quarter as POOLCORP achieved over $1 billion in net sales for the first time in the company's history.

Net sales soared 57% to $1.06 billion, up from $677.3 million in the first quarter of 2020, while base business sales rose 51%.

Despite the vaccines rolling out worldwide, the consumer remains focused on the home and leisure activities, including pools.

Maintenance, replacement, refurbishment and construction activity all remained strong in the quarter resulting in broad sales gains in nearly all product categories.

Gross profit rose 59% to a record $301.1 million from $189.6 million a year ago.

Total debt outstanding was $433.2 million at March 31, 2021, a $152.9 million decrease from total debt at March 31, 2020, as POOLCORP continues to use its cash flow to decrease its debt balance.

Can It Keep Up This Red-Hot Pace?

In the second half of the year, POOLCORP is going to come up against its strong 2020 comps.

Can it out perform last year?

POOLCORP thinks it can continue to see strong growth.

Raised Full Year 2021 Earnings Guidance

Given the record first quarter, and continued emphasis on the home, POOLCORP raised its 2021 full year guidance to a range of $11.85 to $12.60 from its prior guidance of $9.12 to $9.62.

Not surprisingly, the analysts moved to raise their earnings estimates on the year as well, with 3 estimates being revised higher since the earnings report.

The Zacks Consensus has jumped up to $10.94 from $9.49, but that is still significantly below the low end of the company's range so look for more revisions higher in the future.

That's 30% earnings growth, as POOLCORP made $8.42 last year, and it's still below the company's own guidance range.

Shares at New 5-Year Highs

While POOLCORP has been one of the big pandemic winners, the company was already humming along before COVID.

Shares are now at new 5-year highs, up 421% compared to just 121% for the S&P 500 during that same period.

Year-to-date, they've jumped out to new highs, again, gaining 15.7% after treading water at the end of the 2020.

Investors were waiting for confirmation that the hot growth in 2020 would continue in 2021.

And now they have it after the beat and raise.

But POOLCORP isn't cheap. It's trading with a forward P/E of 39.

If you're looking for highly Zacks Ranked stocks in the leisure category that are cheaper on a P/E basis, investors should look at OneWater Marine (ONEW - Free Report) , MarineMax (HZO - Free Report) and Brunswick (BC - Free Report) , which are Zacks Rank #1s (Strong Buy) and #2s (Buys) and have forward P/Es of 10.6, 11 and 15, respectively.

But the party isn't over yet in the pool industry even with the global economy reopening in 2021 and travel picking up.

Home is still where the heart is.

For investors looking for a way to play the focus on the home, POOLCORP is one to keep on the short list.

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